US Stocks Stumble, Treasuries And Gold Rally On Rising Recession Fears – Traders Anticipate Fed Pause In May

Markets swung on Tuesday after further data indications signaled an impending slowdown in economic activity. Job postings decreased more than expected in February, showing the first signs of labor market softening, while declining factory orders reinforced the lackluster ISM Manufacturing PMI print on Monday. 
Recent economic data have prompted investors to discount increasing odds of a recession, thus further trimming Fed hike expectations, liquidating stocks, and flocking to safe-haven assets such as treasuries and gold.

Cues From Tuesday's Trading:

U.S. equity indices fell into the red after the weaker-than-expected job openings data. Small-cap and cyclical sectors sold off, while large-cap and defensive names fared relatively better.

The S&P 500 index fell below 4,100 points, down 0.6%. The Dow Jones Industrial Average index lost 200 points, or 0.5%, to 33,400. The Russell 2000 index was the underperformer, down 2% on the day. The tech-heavy Nasdaq composite eased 0.4%. 

U.S. Indices' Performance On Tuesday

Index	Performance (+/-)		Value
Nasdaq Composite	-0.4%		12,141.74
S&P 500 Index	-0.6%		4,096.45
Dow Industrials	-0.5%		33,409.34

Analyst Color:

Given the mixed economic data, Bill Adams, chief economist at Comerica Bank, sees the next Fed rate decision in May being a “near-tossup.”

“We have a hold lightly penciled into our forecast but another quarter-point hike wouldn’t be a surprise,” he added.

Tuesday's Trading In Major U.S. Equity ETFs: 

In midday trading Tuesday, the SPDR S&P 500 ETF Trust SPY lost 0.6% to $408.72, the SPDR Dow Jones Industrial Average ETF DIA was 0.7% lower to $333.68 and the Invesco QQQ Trust QQQ edged 0.2% down to $319.56, according to Benzinga Pro data.

Among U.S. equity sectors, the Energy Select Sector SPDR Fund XLE suffered the most, down 2.6% on the day, after being the best-performing sector in the previous session. The Industrial Select Sector SPDR Fund XLI was also in deep red, down 2.4%. 

The Utilities Select Sector SPDR Fund XLU was the best performer of the day, up by 0.6%. The Health Care Select Sector SPDR Fund XLV also rose 0.4%.  

Latest Economic Data:

The U.S. Bureau of Labor Statistics reported that the number of job openings fell by 632,000 to 9.9 million in February 2023, the lowest level since May 2021 and below market estimates of 10.4 million, suggesting that the labor market may have begun to weaken. 

According to the U.S. Census Bureau, new orders for U.S. manufactured goods decreased 0.7% month-on-month in February 2023, following a revised 2.1% loss in January and falling short of market estimates of a 0.5% contraction.

The IBD/TIPP Economic Optimism Index increased for the third month in a row to 47.4 in April 2023, the highest level since December 2021, up from 46.9 in March. Yet, the index stayed in contractionary territory, below the neutral threshold of 50, for the 20th month in a row, according to the Technometrica Market Intelligence/The Investor's Business Daily survey. 

Fed Governor Lisa Cook and Boston Fed President Eric Rosengren will speak at 1: 30 p.m. EDT.

See also: Best Futures Brokers

Stocks In Focus:

Newmont Corporation NEM is the top gainer in the S&P 500 index, up 3.5% so far on the day, following a 2% surge in gold prices. 

Etsy, Inc. ETSY rose 2.4% after Piper Sandler upgrades from Neutral to Overweight and increases its price target from $135 to $140. 

• ServiceNow, Inc. NOW gained 2.2% after Baird upgrades from Neutral to Outperform and increases its price target from $475 to $548. 
• Steel Dynamics, Inc. STDL tumbled 9% and Valero Energy Corp. VLO fell 8%, amid a sell-off hitting cyclical sectors following weaker-than-expected economic data.  
• AMC Entertainment Holdings, Inc. AMC fell over 21% after the movie theater chain said it has reached a settlement agreement concerning a shareholder lawsuit that would allow it to increase the number of authorized shares to 550 million of Class A shares and implement a 1-for-10 reverse stock split. This will facilitate the conversion of AMC Preferred Equity Units into Class A common stock. APE shares rose about 20%.
• Virgin Orbit Holdings, Inc. VORB fell about 23.5% after the company filed for Chapter 11 bankruptcy.

Top Analysts’ Call

• Chevron Corp. CVX: Exane BNP Paribas upgrades Chevron from Underperform to Neutral with a $200 price target
• CSX Corp. CSX: Morgan Stanley upgrades CSX from Underweight to Equal-Weight with a $27 price target
• Norfolk Southern Corp. NSC: Morgan Stanley upgrades Norfolk Southern from Underweight to Equal-Weight with a $177 price target

Commodities, Bonds, Forex, and Other Global Equity Markets:

Crude oil eased 0.5%, following sessions of strong gains, with a barrel of WTI-grade crude easing to $80. The United States Oil Fund ETF USO fell 0.4% to $70 per share.  

Treasury yields collapsed, with the yield on the 10-year Treasury Note down 8 basis points to 3.34%. The yield on the two-year yield Treasury Note was 13 basis points lower at 3.84%. 

The dollar extended its losses, with the U.S. Dollar index falling below 102 levels. 

European equity indices all closed in the red. The iShares MSCI Eurozone ETF EZU was 0.1% lower. 

Gold further rallied amid lower U.S. Treasury yields, up 2% to $2,025/oz. The SPDR Gold Trust GLD was up 2% to $188. Silver spiked nearly 4% to $24.99, with the iShares Silver Trust SLV up 3.9% to $22.90. Bitcoin edged 0.7% higher to $28,031. 

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